Schools Chancellor Harold Levy hopes a new teachers contract will be settled next month – with considerable raises to attract rookie teachers, sources said yesterday.

Levy spoke about the status of teacher contract talks during a conference call with superintendents yesterday.

“The chancellor said that was on his wish list – and it was a possibility,” said one board source who participated in the meeting.

“It’s his hope that there would be a contract by the end of June.”

Another board source familiar with the discussion said the chancellor discussed providing a boost in salaries to help recruit new teachers for the school year beginning in September.

But Levy told his subordinates he and Mayor Giuliani have to “give up some things” to get a contract with the United Federation of Teachers.

Meanwhile, the UFT has indicated it is willing to bend by embracing merit pay – an idea championed by the mayor.

But the union will only support “school-based” merit pay that offers bonuses to all teachers for improved student test scores, while the mayor wants to provide bonuses based on individual teacher performance.

The chancellor raised the contract issue because school officials have to plan their budgets for the fall, and an increase in salaries would have to be factored in.

The chancellor did not return phone messages for comment yesterday.

UFT president Randi Weingarten also declined comment.

A City Hall source confirmed the mediated talks are progressing, but a collective bargaining agreement with teachers is not imminent. Their contract expired last November.

“Is it moving in the right direction? Yes,” the official said.

“Is there a settlement in the offing? Not really.”

Sources said pressure is on Weingarten to rally the troops to vote for a new contract before school’s out for the summer.